California PUC to consider resource adequacy deal between San Diego, NRG

On the agenda for the Oct. 27 meeting of the California Public Utilities Commission is a resolution that, if approved by the commissioners, would grant San Diego Gas & Electric‘s (SDG&E) request for a resource adequacy (RA) capacity agreement with NRG Power Marketing LLC for the full 2017 calendar year.

The need for the NRG contract arose from the California ISO‟s 2017 Local Capacity Technical Analysis Final Report and Study Results, which led SDG&E to bilateral negotiations with NRG. The NRG contract will provide SDG&E with Local, System, and Flexible RA benefits from Encina Power Station, an existing natural gas-fired combined-cycle thermal/steam generating facility.

The 964.5-MW Encina unit is the largest non-investor-owned utility generation asset in the San Diego local area. Encina is subject to the State Water Resources Control Board (SWRCB) once-through cooling (OTC) policy with a compliance deadline of Dec. 31, 2017.

The NRG contract is for 858.5 MW of Local and System RA capacity and 280 MW of flexible capacity, for a term beginning on Jan. 1, 2017, and continuing through Dec. 31, 2017. The NRG contract does not include any energy tolling capacity.

There are ten major Local Capacity Areas (LCAs) within the CAISO Balancing Authority Area, each of which can have sub-areas. For SDG&E, there are two major LCAs: the San Diego local sub area, and the Greater San Diego-Imperial Valley area that encompasses the San Diego Local sub-area and also the Imperial Valley. The Local Capacity Requirement (LCR) for the San Diego local sub-area and the Greater San Diego-Imperial Valley area as determined in the annual technical study are used by the CPUC to assign local RA obligations to load-serving entities (LSEs) in the San Diego region.

In 2017, the CAISO revised the San Diego LCR need upward primarily due to concerns with the availability of the Aliso Canyon gas storage facility, which affected the ability of LA Basin gas-fired generation to be called upon on short notice. According to the 2017 LCT Study, “In an effort to help mitigate the Aliso Canyon gas storage constraints, the ISO balanced the gas generation resource needs in the LA Basin and the San Diego sub-area to lessen the impact that the absence of Aliso Canyon has on the reliability of the electric transmission system in the LA Basin and San Diego area.”

In light of this additional LCR need, SDG&E negotiated bilaterally with NRG seeking Local, System, and flexible RA, and the negotiations concluded with this NRG contract now up for commission approval. The bilateral negotiations were monitored by an independent evaluator, Merrimack Energy Group.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.